Tribunal gives Ontario Environment Ministry Broad Preventative Powers over Migrating Contamination

by Stanley D. Berger

On September 1, 2017, the Ontario Environmental Review Tribunal in the matter of Hamilton Beach Brands Canada Inc. et al. v. the Director, Ministry of the Environment and Climate Change made a preliminary ruling that the Director had jurisdiction to make an order under s.18 of the Environmental Protection Act (EPA) requiring a person who owns or owned, or has or had management or control of a contaminated undertaking or property to delineate contamination that had already migrated to off-site properties. The property in question, formerly a small-appliance manufacturing business, was contaminated and the various contaminants were of concern to the Ministry, having migrated to other Picton residential, commercial and institutional properties where they might be entering nearby buildings by vapour intrusion. Section 18 of the EPA provides that the Director may make orders preventing, decreasing or eliminating an adverse effect that may result from the discharge of a contaminant from the undertaking or the presence or discharge of a contaminant in, on or under the property. The Director’s Order was challenged on three grounds:

  1. The adverse effect the Director could address was limited to a future event or circumstance (given that s.18 is prospective and preventative);
  2. The adverse effect had to relate to the potential off-site migration of a contaminant that was on an orderee’s property at the time the order was made;
  3. The order could require work only on site but not off-site, to address the risk of an adverse effect.

The Tribunal rejected all three arguments, reasoning that adverse effects resulting from contamination were frequently ongoing rather than static, with no clear line between existing and future effects. The Tribunal looked to the purpose of the EPA which was to protect and conserve the natural environment and found the orderees’ arguments were inconsistent with this purpose. Contamination and adverse effects were not constrained by property boundaries and therefore it was immaterial whether the contaminant was on the orderee’s property at the time the order was made. Finally, the list of requirements that could be ordered under s.18(1) EPA included off-site work. _________________

About the Author

Mr. Berger has practiced regulatory law for 36 years. He is a partner at Fogler Rubinoff LLP. He is certified by the Law Society of Upper Canada as a specialist in Environmental Law. He represents nuclear operators and suppliers in regulatory and environmental matters and in the negotiation of risk clauses in supply contracts and government indemnity agreements.He has prosecuted and defended environmental , occupational health and safety and criminal charges . He represents clients on access to information appeals before Ontario’s Freedom of Information Commission. He has also represented First Nations seeking equity partnerships in renewable energy projects. He started as an Assistant Crown Attorney in Toronto (1981), became the Deputy Director for Legal Services /Prosecutions at the Ministry of the Environment (1991) and Assistant General Counsel at Ontario Power Generation Inc.(1998-2012) During his 14 years at OPG, Mr. Berger won the President’s Award for his legal contribution to the Joint Review Panel environmental assessment and licensing hearing into the Nuclear New Build Project for Clarington . He won a Power Within Award for his legal support of the Hosting Agreement with local municipalities for the project to create a long term deep geologic repository for low and intermediate nuclear waste in Tiverton, Ontario.

 

Canadian company fined $100,000 for contravening dry-cleaning regulations

Recently, Dalex Canada Inc., located in Concord, Ontario, pleaded guilty in the Ontario Court of Justice to one count of contravening the Tetrachloroethylene (Use in Dry Cleaning and Reporting Requirements) Regulations made pursuant to the Canadian Environmental Protection Act, 1999.  Dalex Canada Inc. was fined $100,000, which will be directed to the Environmental Damages Fund.  The Environmental Damages Fund is administered by Environment and Climate Change Canada. Created in 1995, it provides a way to direct funds received as a result of fines, court orders, and voluntary payments to projects that will benefit our natural environment.

Dalex Headquarters, Concord, Ontario

Environment and Climate Change Canada enforcement officers conducted inspections in 2014 and identified instances where tetrachloroethylene was being sold to owners and operators of dry-cleaning facilities who did not meet regulatory standards.  As a result of Environment and Climate Change Canada’s subsequent investigation, Dalex Canada Inc. pleaded guilty to selling tetrachloroethylene to an owner or operator of a dry-cleaning facility who was not in compliance with the regulations.  The regulations prohibit anyone from selling tetrachloroethylene to dry cleaners unless the dry-cleaning facility is compliant with certain sections of the regulations.

In addition to the fine, the court ordered Dalex Canada Inc. to publish an article in an industry publication, subject to Environment and Climate Change Canada’s approval.  Dalex Canada Inc. is also required to notify Environment and Climate Change Canada before resuming sales of the regulated product to dry cleaners. As a result of this conviction, the company’s name will be added to the federal Environmental Offenders Registry.  The Environmental Offenders Registry contains information on convictions of corporations registered for offences committed under certain federal environmental laws.

Tetrachloroethylene, also known as PERC, enters the environment through the atmosphere, where it can damage plants and find its way into ground water.

CHAR Technologies Ltd. Announces Approval of $1 Million Grant

CHAR Technologies Ltd. (the “CHAR”) (YES – TSXV) is pleased to announce that it has been approved for a grant totalling $1 million provided by the Government of Ontario through the Ontario Centres of Excellence (“OCE”). The grant is in support of CHAR’s current SulfaCHAR production project, which has previously received funding and support from both Sustainable Development Technology Canada (“SDTC”) and the Canadian Gas Association (“CGA”).

“This grant will allow CHAR to both redeploy financial resources currently committed to the SulfaCHAR project, while at the same time will allow CHAR to expand the scope of the project,” said Andrew White, CEO of CHAR. “The funding recognizes the carbon-related benefits of the project, and will allow CHAR to more rapidly execute on the production and use of SulfaCHAR.”

Funding will be disbursed on completion of three milestones. CHAR has received initial funding of $237,759, and will receive three additional payments on milestone and project completion.

About CHAR
CHAR is in the business of producing a proprietary activated charcoal like material (“SulfaCHAR”), which can be used to removed hydrogen sulfide from various gas streams (focusing on methane-rich and odorous air). The SulfaCHAR, once used for the gas cleaning application, has further use as a sulfur-enriched biochar for agricultural purposes (saleable soil amendment product).

About OCE
Ontario Centres of Excellence (OCE) drives the commercialization of cutting-edge research across key market sectors to build the economy of tomorrow and secure Ontario’s global competitiveness. In doing this, OCE fosters the training and development of the next generation of innovators and entrepreneurs and is a key partner with Ontario’s industry, universities, colleges, research hospitals, investors and governments. OCE is a key partner in delivering Ontario’s Innovation Agenda as a member of the province’s Ontario Network of Entrepreneurs (ONE). Funded by the Government of Ontario, the ONE is made up of regional and sector-focused organizations and helps Ontario-based entrepreneurs rapidly grow their company and create jobs.

Fine for Illegal Storage of PCBs

Recently in a Quebec court, Mr. Isaac Gelber pleaded guilty to three charges related to the illegal use/storage of PCBs and he was fined $25,500 under the Canadian Environmental Protection Act, 1999.

The investigation, led by Environment and Climate Change Canada, showed that Mr. Isaac Gelber had committed several violations to the Act, namely:

  • Using transformers containing polychlorinated biphenyls (PCBs) thereby violating the PCB Regulations;
  • Failing to comply with the environmental protection compliance order, issued by an officer in January 2013, to dispose of three (3) transformers containing more than 500 mg/kg of PCBs
  • Knowingly making false or misleading statements

Polychlorinated biphenyls (PCBs) used to be very popular in a wide range of industrial and electrical applications. They were excellent fire resistant coolants and insulating fluids in transformers, capacitors, cables, light ballasts, bridge bearings, and magnets, among many other things.  Unfortunately, they turned out to be persistent and toxic to humans and the environment. PCBs can:

  • Travel long distances and deposit far away from their sources of release
  • Accumulate in the fatty tissues of living organisms
  • Cause complications like cancer and birth defects
  • Potentially disrupt immune and reproductive systems and even diminish intelligence.

Amended PCB Regulations under the Canadian Environmental Protection Act, 1999 (CEPA), came into force on September 5, 2008. The new regulations set phase out dates for in –use PCB equipment, as well as rigorous labelling and reporting requirements.  They also require prompt and proper disposal of PCB equipment, once it is no longer in active use.

The Department of Environment and Climate Change enforcement officers conduct inspections and investigations under the Canadian Environmental Protection Act, 1999.  They ensure that regulated organizations and individuals are in compliance with environmental legislation.

 

What To Do If You Find An Underground Fuel Oil Tank In Your Backyard

Fuel oil leaks from underground storage tanks (“USTs”) into the soil and groundwater can result in environmental damage and significant costs to homeowners. Property owners should be proactive in addressing a UST upon discovery to minimize liability for potential damage arising from a UST.

Prior to the 1970s, fuel oil stored in USTs was a common method of heating homes and businesses in Ontario. In the 1970s, many property owners switched to natural gas as a heating source.1 Frequently, USTs were left in the ground, unbeknownst to subsequent property owners.

Property owners in Ontario are responsible for any USTs on their properties, whether the owner installed the UST or not. This responsibility may extend to investigating impacts arising from leaks or spills of fuel oil, as well as remediating resulting impacts to soil and groundwater.

Property owners should be aware of the significant consequences that may arise from a leaking UST, including

reduced property value
the Technical Standards and Safety Authority (“TSSA”) may require delineation and/or clean up of environmental impacts to soil and groundwater
regulatory action from the Ministry of the Environment and Climate Change (“MOECC”) where contamination migrates off-site, including prosecutions and Orders, and
lawsuits from neighbours if fuel oil migrates to neighbours’ lands.

So You Found A Tank. Now What?

If you discover a UST, you need to be diligent, take action and assemble your environmental team.

Consider retaining an environmental lawyer before taking any steps.

An experienced environmental lawyer will be able to assist you to retain, under legal privilege, a reputable environmental consultant to investigate and make recommendations about the UST and possible impacts to the subsurface.2

The environmental lawyer will also assist you to understand your legal obligations. There are various regulatory requirements that apply to both USTs and aboveground storage tanks, including the CSA-B139 Series-15 Installation Code for Oil-Burning Equipment, 2015, the TSSA’s Fuel Oil Code Adoption Document Amendment FS-219-16 dated April 4, 2016, and O Reg 213/01: Fuel Oil.3

Depending on the size of the UST, the regulatory requirements for small or large installations may be applicable. Age may also be an important consideration.

In the event that fuel oil from a UST has impacted your property or properties beyond, the environmental lawyer can assist you in determining next steps and explaining the legal risks and liabilities that you may face (including civil lawsuits and/or regulatory action by the TSSA, MOECC or others).

With the right environmental team, you can successfully navigate and mitigate the risks and liabilities associated with USTs.

Footnotes

1 “Evolution of Canada’s Oil and Gas Industry”, online http://www.energybc.ca/cache/oil/www.centreforenergy.com/shopping/uploads/122.pdf

2 The environmental consultant must be a Qualified Person, and only a licensed tank contractor may remove a UST. See Environmental Management Protocol for Fuel Handling Sites in Ontario TSSA EMP-2012, August 2012, s 4, and O Reg. 213/01: Fuel Oil, s 4.

3 O Reg. 213/01: Fuel Oil under the Technical Standards and Safety Act, 2000, S.O. 2000, c. 16.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Trump’s Enviro Law Impact May Not Be What Many Anticipate

Many posit a material decline in environmental enforcement and a retrenchment or reversal of environmental regulatory initiatives in the new Trump administration. Certainly, one would be prudent to consider that scenario and its implications, given the repeatedly expressed intentions to do just that, by both the president and his team before and after his inauguration.

We believe there are three concrete areas where activism and activity will be on the rise during the Trump administration, targeting a variety of environmental, public health and liability issues of considerable potential consequences to the regulated community, environmental practitioners and the public at large.

Specifically, we postulate that the next four years will see a significant increase in (1) litigation by environmental groups, (2) regulatory enforcement and other actions by multiple states, and (3) efforts by the plaintiffs bar to capitalize on what may be perceived broadly as a withdrawal of the federal government from engagement on matters of environmental protection and public health. Each of these forms of prospective activism is addressed below.

LITIGATION BY ENVIRONMENTAL GROUPS

Environmental nongovernmental organizations (ENGOs) have long established themselves as key players in matters of environmental public policy, regulation and enforcement. The successes of their efforts are far too numerous to count and too diverse to categorize summarily. At all levels of government, ENGOs have prevailed in litigation that has forced agencies to regulate, overturned permitting decisions, and enforced compliance against those in violation of environmental laws and regulations.

During the Trump administration, we would expect the ENGOs to focus their considerable fire power — with renewed vigor enhanced by growing memberships and contributions — in three discrete areas.

First, there is the well-traveled path of using the courts to obtain review and rejection of U.S. Environmental Protection Agency regulations deemed nonconforming with statutory mandates. Specifically, any number of the environmental “rollback” initiatives discussed publicly to date by those associated with the new administration or their allies in Congress will require the U.S. EPA to go through rulemaking under the Administrative Procedure Act.

More specifically, to rescind or amend many existing regulations, including those promulgated in the waning days of the Obama administration, rulemaking will be necessary. Those rules will, in turn, be subject to judicial review.

Many, though not all, U.S. EPA regulations or rulemakings are subject to judicial review before the D.C. Circuit. Its present political composition is seven active judges appointed by Democratic presidents and four active judges appointed by Republican presidents. Litigious ENGOs can thus anticipate a reasonable possibility of drawing a receptive three-judge panel when seeking to overturn Trump administration regulations that appear to the ENGOs to relax current standards, withdraw recent initiatives or otherwise make life easier for the regulated community at the expense of the environment, unless the administration can demonstrate, on the record, that its new policies are not arbitrary or capricious.

Making that demonstration, however, will take time (i.e., to amass a supportive administrative record), which may be contrary to the president’s style and methods to date, in which the deliberative process is eschewed in favor of speed. (For example, the president’s controversial ban on immigration from several predominately Muslim countries has been criticized not just on substantive/policy/legal grounds, but for the administration’s failure to (1) consult with key congressional leaders of its own party; (2) provide advance notice to its own top intelligence, U.S. Department of Homeland Security and U.S. Customs and Border Protection officials; and (3) take due care to draft an executive order with sufficient care, clarity and details). We predict that judicial review of EPA rulemakings will be a fertile area of environmental practice if that decision-making model persists.

Second, ENGOs can be expected to use litigation to force agencies to take regulatory action based on statutory requirements or past policy statements. A perfect example has been referred to as the “Numeric Nutrient Wars.” In 2008, five ENGOs sued the EPA to establish numeric nutrient criteria for the state of Florida, asserting that the EPA had a nondiscretionary obligation to establish such criteria under the Clean Water Act. The U.S. EPA, after initially opposing the ENGO suit, settled the litigation by agreeing to develop and propose the criteria. The U.S. EPA criteria were instantly challenged by the state of Florida, local governments and industry groups as arbitrary and capricious (and by the ENGOs as being insufficiently protective). A federal district court in Florida struck a portion of the rules, ordering the EPA to re-propose elements of the nutrient criteria.

Third, of course, are the opportunities provided by statute for citizen enforcement of compliance with environmental permits and regulations. Many federal statutes provide for such enforcement; and ENGOs have a long and often successful history of bringing these sometimes ready-made cases. For example, the Clean Water Act prohibits the discharge of pollutants into the nation’s waters, unless authorized and subject to a discharge permit that sets appropriate discharge limitations. The Clean Water Act imposes the responsibility of monitoring and reporting permit noncompliance upon the permit holders, requiring them to submit discharge monitoring reports (DMRs). Self-reported non-compliances in DMRs have served as the basis for numerous lawsuits by ENGOs over the years.

STATE ACTIVISM

It is widely anticipated that the state of California will take positions and actions in significant contrast to the loosening of environmental controls promised by the Trump administration. Leading officials in California have proudly laid claim to that role and course of action. For example, “Gov. Jerry Brown unleashed a full-scale attack on President Donald Trump, declaring California won’t give up a string of policies ranging from climate change curbs to immigrant-friendly laws.”

In some instances, actions by California to impose new or stricter requirements on the regulated community have had repercussions beyond the state’s boundaries. For example, the “check engine light” symbol in a vehicle is part of the on-board diagnostic (OBD) system, which, among other things, monitors a vehicle’s emissions control system to ensure it is working properly. Certifications of OBD systems now go through the California Air Resources Board instead of the U.S. EPA, mainly because CARB’s certification requirements are more stringent than those of the EPA. Certainly, it is reasonable to assume, given the politics now at play and the public statements of officials at the state and federal levels, that some in California will seek specifically to take legislative, regulatory enforcement, and other actions that will have transboundary consequences.

Notwithstanding some Californian’s boast to represent the front line in opposition to relaxation of environmental enforcement or regulation, the state is by no means the only jurisdiction to have a record of stricter regulation or to manifest the intention to so behave in the coming years. Twenty-one states have a Democratic attorney general. Attorney General Eric Schneiderman of New York, for example, has been outspoken about his intention to take on the new administration on environmental issues; he also issued a press release warning that he “stands ready to use the full power of his office to compel enforcement of our nation’s environmental laws.”

THE PLAINTIFFS BAR

It is neither a secret nor a reason for embarrassment that the plaintiffs bar will direct itself toward those litigations in which fees are readily recoverable, particularly where they may materially or vastly exceed litigation costs and investment. So, given past history and anticipated developments at the federal regulatory and enforcement level, where do we expect the plaintiffs bar to go? Again, we anticipate three principal avenues of intensified activity. First, plaintiffs’ lawyers can recover fees in many federal citizen suit enforcement actions to secure compliance with existing laws, regulations and permits. At the local and regional level, many organizations or plaintiffs’ firms with whom they collaborate may view this to be “low-hanging fruit,” in an era of lax enforcement despite self-reporting of noncompliance (e.g., publicly available DMRs).

Second, recent years have shown the plaintiffs bar to be creative in fashioning causes of action, damages theories and prayers for injunctive relief that coincidentally garner attorneys’ fees in attractive amounts in a wide variety of environmental protection and public health situation cases. These cases include anything from toxic mold, to fracking, to allegedly harmful chemicals such as polychlorinated biphenyls (PCBs).

Third and finally, the true “home run” swing for the plaintiffs bar resides in the field of toxic tort, where they have enjoyed both considerable successes and notable failures. The plaintiffs bar is not monolithic; plaintiffs lawyers pursue and accept representations for diverse reasons. For those for whom earning a fee is one source of motivation, there can be no disputing that a larger fee is more attractive than a smaller fee. Hence, the cases that yield the largest damages verdicts against which a contingency fee would be assessed are the most attractive, especially to the big players.

The prospect of diminished enforcement and regulatory retreat under the Trump administration would seemingly yield several attractive toxic tort opportunities for the plaintiffs bar. First, litigation against manufacturers or users of so-called “chemicals at risk” — i.e., those chemicals that have been tentatively, provisionally or newly identified as toxic or harmful to human health (by the EPA or other bodies), but exposure to which is continuing in certain circumstances at levels that are arguably harmful. The contention would be that lethargy or turnabouts by the U.S. EPA, in the face of past scientific findings or thesis, has allowed harmful exposure to injure populations of varied sizes, all of whom are entitled to damages. We do not credit the thesis nor address its merits as to any of a long list of chemicals that may become ripe for such litigation; we merely foresee that consequence to the U.S. EPA retreating from existing standards or pending initiatives in any number of its regulatory programs.

Second, under the Resource Conservation and Recovery Act and other laws, federal and state regulators and enforcement personnel have the authority to take sweeping and often unilateral action to abate “imminent and substantial endangerments” or serious hazards to human health and the environment. Query whether a cessation or reduction in the initiation of such enforcement at the federal level — either in fact or as a matter of perception — will widen the door to private litigation, sanctioned by federal statutes or arising under state law (common or statutory), to address identifiable hazards to local communities.

One disincentive in instituting such actions, at least for some plaintiffs lawyers, would be the inability to translate injunctive relief into compensable money damages for which attorneys’ fees would be derivative and lucrative. Consequently, one might theorize that the plaintiffs bar will seek to marry injunctive actions to abate imminent substantial endangerments with tort claims giving rise to potentially significant damages. For example, a citizen suit under RCRA is injunctive in nature, and courts have repeatedly rejected attempts to recover money damages. Some courts, however, have exercised supplemental jurisdiction over damages claims brought under state law that accompany the RCRA claim.

Finally, should the perception continue to grow that federal authorities are or will be too lenient in permitting decisions — e.g., allowing increased air emissions from permitted facilities, would that provide another opening to the plaintiffs bar? Challenges to permits and citizen enforcement, we predict, will undoubtedly test this thesis.

CONCLUSION

The Trump administration will no doubt seek many changes in law and policy vis-à-vis the environment. Advocates of many of these changes proclaim them to be aimed at reducing what they would characterize as over-regulation or overly zealous government enforcement. History (and science) have shown, however, that with every action, there is an equal and opposite reaction. Litigation by environmental groups, regulatory enforcement and other actions by the states, and private litigation by the plaintiffs bar will likely increase correspondingly, ushering in a new phase in the long saga of environmental protection, regulation and the importance of environmental law.

_________________

This article was first published in Law360, a LexisNexis Company. It can also be found at website of Arnold & Porter Kaye Scholer LLP.

About the Authors

Lester Sotsky headed the Arnold & Porter Kaye Scholer LLP firm’s environmental practice from 2006 to 2015. He is a broadly experienced environmental litigator, handling multiple toxic tort, hazardous waste enforcement, Clean Water Act, appellate, and white collar matters. Mr. Sotsky has represented major corporations in virtually every major manufacturing and mining industry, as well as Native American Tribes and other stakeholders.

 

 

Andy Wang’s practice focuses on civil litigation on a wide array of national security, white-collar, and environmental matters. Mr. Wang received his Juris Doctorate, cum laude, from Harvard Law School, where he was President of the Harvard National Security and Law Association, Senior Articles Editor for the Harvard National Security Journal, and an oralist for an Ames Moot Court Semifinalist team. He graduated from Rice University, magna cum laude, with a Bachelor of Arts in Political Science and History.

Ontario Court of Appeal Makes Significant Ruling on Damages for Property Contamination

Introduction

In a decision released January 11, 2017 – Crombie Property Holdings Limited v. McColl-Frontenac Inc. et. al – the Ontario Court of Appeal overturned a summary judgment decision of the Superior Court of Justice that dismissed a civil lawsuit seeking damages for property contamination based upon the running of a limitation period. The lower court decision may be found here.

The Court of Appeal decision will be carefully scrutinized by all environmental lawyers and other civil litigators who regularly handle such claims.

Background
The lawsuit sought damages for contamination to the “Crombie Property” from an adjacent commercial property formerly used as a gas station. From the Court of Appeal’s decision, the following chronology of events may be discerned:

Date Event
2003-2005 Prior owners of the Crombie Property commission Phase 2 Environmental Site Assessments (ESA) which find evidence of    low level hydrocarbon contamination of groundwater, but indicated those levels were decreasing and recommended no further study.
2007 Testing confirms that soil and groundwater conditions at the defendant Dimtsis Property met the applicable Ministry of the  Environment (“MOE”) standards.
2008 The MOE acknowledges a Record of Site Condition. Under applicable law, the acknowledgment confirmed that the Dimtsis Property complied with environmental regulations.
2012 Crombie enters into an agreement to purchase 22 properties, including the Crombie Property subject to the lawsuit. Presumably, under the agreement, Crombie was required to waive all conditions by March 8, 2012.

2012
February 20
Crombie’s consultant Stantec tells Crombie that a gas station and dry cleaner were formerly nearby the Crombie Property.

February 27
In initial scheduling discussions, Stantec and Crombie agree that Stantec will provide a draft Phase 2 ESA for the Crombie Property by April 9, 2012, with verbal results by March 23, 2012.

February 29
Five historical reports (2003-2008) concerning contamination at the Crombie Property are provided to Crombie.
First week of March Crombie asserts that it instructed Stantec that the Phase 2 ESA is not urgent because Crombie is        waiving e-conditions and closing. Crombie claims it did not discuss or learn of Phase 2 ESA test results until draft Phase 2 delivered in May.

March 8
Crombie waives all conditions (including environmental conditions) on the purchase of the 22 properties.

March 14
Subsurface Phase 2 ESA work begins on the Crombie Property. Initially only with respect to VOC’s, but expanded to              include hydrocarbons when Stantec’s sampling noted petroleum hydrocarbon odours.

March 20
Phase 1 ESA by Stantec provided to Crombie. Stantec summarizes five historical reports and recommends drilling. Stantec also notes that hydrocarbon levels reported in the most recent of the historical reports would not meet current site condition standards.

March 23
Lab results obtained by Stantec for groundwater show exceedances.

March 30
Lab results obtained by Stantec for soil show exceedances.

April 10
Crombie becomes owner of Crombie Property.

May 9
Draft Phase 2 ESA by Stantec provided to Crombie with March lab results. Shows hydrocarbon limits exceeded in groundwater and soil. Crombie attests only learned of actual contamination on this date.

September 17
Date the final Phase 2 ESA is provided to Crombie. Crombie initially pleads in Statement of Claim that it only became aware of contamination on this date.

Standard of Review
The Court confirmed that on a summary judgment motion, the determination of the lower court that there is no genuine issue for trial is a “question of mixed fact and law.” As a result, the standard of review on appeal is whether the trial judge committed a “palpable and overriding error.”

Issue on Appeal

The narrow issue on appeal was whether Crombie’s claim in respect of the environmental contamination of its property was “discovered” within the meaning of s. 5 of the Limitations Act, 2002 before April 28, 2012 (two years prior to the commencement date of the action).

That is, the Court clarified that on the appeal before it, only actual knowledge of contamination (injury, loss, or damage under s. 5(1)(a)(i) of the Limitations Act, 2002) was at issue. The Parties did not take issue that the requirements of s. 5(1)(a)(ii) – cause of the injury, s. 5(1)(a)(iii) – identity of defendants, and s. 5(1)(a)(iv) – action is appropriate means of seeking a remedy, had been met.

The Court stressed that the test under s. 5(1) of the Limitations Act is actual knowledge, not mere possibility:

The limitation period runs from when the plaintiff is actually aware of the matters referred to in s. 5(1)(a)(i) to (iv) or when a reasonable person with the abilities and in the circumstances of the plaintiff first ought to have known of all of those matters…

It is “reasonable discoverability” and not “the mere possibility of discovery” that triggers a limitation period.[1] [emphasis added]

Equating Suspicion of Contamination with Actual Knowledge of Contamination

Under this heading, the Court ruled that the motion judge made a palpable and overriding error in concluding that mere suspicions of possible contamination were enough to trigger the running of s. 5(a)(i).

It was not sufficient for the defendants to prove that by February 29, 2012, Stantec and Crombie had Phase 2 reports for the Crombie property which showed historical contamination on the subject property six years earlier:

…At its highest, in relation to hydrocarbon contamination, the Pinchin Report revealed the presence of hydrocarbons in groundwater in 2005 that were marginally above potable water standards and appeared to be decreasing, leading Pinchin to recommend no further investigation. It was not evidence of contamination of the property over six years later, nor was it interpreted as such by Stantec, Crombie’s environmental consultant. Indeed, the purpose of the Phase II drilling and sampling program recommended and undertaken by Stantec, was to determine whether or not the soil or groundwater at the Crombie Property was contaminated.[2]

And further:

It was not sufficient that Crombie had suspicions or that there was possible contamination. The issue under s. 5(1)(a) of the Limitations Act, 2002 for when a claim is discovered, is the plaintiff’s “actual” knowledge. The suspicion of certain facts or knowledge of a potential claim may be enough to put a plaintiff on inquiry and trigger a due diligence obligation, in which case the issue is whether a reasonable person with the abilities and in the circumstances of the plaintiff ought reasonably to have discovered the claim, under s. 5(1)(b). Here, while the suspicion of contamination was sufficient to give rise to a duty of inquiry, it was not sufficient to meet the requirement for actual knowledge. The subsurface testing, while confirmatory of the appellant’s suspicions, was the mechanism by which the appellant acquired actual knowledge of the contamination. [emphasis added]

In addition, the finding by the motion judge that the contamination was in the soil and therefore “available and discoverable,” set too low a threshold for discoverability under s. 5(1)(a)(i):

The fact that contamination was there to be discovered was of course not sufficient to start the limitations clock.[3]

Failure to Consider Relevant Circumstances: the Transactional Context

Under this heading, the court found the motion judge made palpable and overriding errors on two counts. First, the lower court wrongly imputed actual knowledge of contamination to Crombie in March 2012 (when the laboratory results were sent to Stantec), contrary to the contextual evidence. Second, the court wrongly imputed reasonable discoverability of actual contamination to Crombie before April 28, 2012, again contrary to the contextual evidence.

Concerning actual knowledge, the court stated:

The fact that Crombie was directing and paying Stantec [to complete both a Phase 1 and 2 ESA] … was not sufficient to ground the [motion judge’s] conclusion that Crombie knew about the test results as soon as they were reported by the laboratory to Stantec.[4]

According to the Court, the motion judge also erred by inferring that because Stantec had verbally reported the Phase 1 findings to Crombie, that it must have also verbally reported the March 2012 laboratory results to Crombie. According to the Court, this reasoning “…ignores completely the circumstances of the multi-property transaction Crombie was involved in, the due diligence process and the waiver of conditions” and “she did not factor Crombie’s [March 8, 2012] waiver of conditions into her assessment of its conduct.” Most important, the Court accepted the plaintiff’s argument that:

Once the conditions were waived, there was no urgency to confirming whether the Crombie Property was contaminated, as Crombie was required to close the purchase. It was unreasonable for the motion judge to draw an inference about Crombie’s knowledge of the test results without considering such circumstances.[5]

The same mistake, says the Court, also caused the motion judge to err by inferring that the contamination was reasonably discoverable under s. 5(1)(b), prior to April 28, 2012:

Determining “whether the plaintiff has acted reasonably will include an analysis of not only the nature of the potential claim, but also the particular circumstances of the plaintiff.”[6]

In short, the Court of Appeal accepted that under the particular circumstances of the multi-property transaction and the waiver of all conditions (including environmental), it was reasonable for the plaintiff to not treat the Phase 2 investigation as urgent and to postpone communications around the contamination of the Crombie property until whenever it was communicated by the environmental consultant on a non-urgent basis (in this case, by May 9, 2012):

…in arriving at her conclusion that Crombie’s claim was reasonably discoverable, the motion judge did not consider the relevant and important circumstances of the multi-property transaction and its waiver of conditions. What the motion judge ought to have considered, was whether, a reasonable person in Crombie’s position, after the waiver of conditions, would have sought out and obtained the laboratory results before April 28, 2012.[7]

Continuing Tort

Regarding the continuing tort argument made by the appellant, the Court found it unnecessary to address this issue and declined to do so.

Analysis

The Court of Appeal’s decision is noteworthy, and also problematic, in a number of respects:

  1. It confirms existing authority that summary judgment decisions make rulings of “mixed fact and law”, and are only appealable if there is a “palpable and overriding error.”
  2. It affirms that a Phase 1 ESA is generally not enough to prove knowledge of actual contamination, only “suspicions” or the “possibility” of such contamination. However, if the Phase 1 ESA provides knowledge of a potential claim, this may “trigger a due diligence obligation”, a “duty of inquiry”, to undertake a Phase 2 ESA.
  3. More controversially, however, the Court’s decision suggests that even where there exists a due diligence obligation or duty of inquiry to undertake a Phase 2 ESA, the party contracting for that work, or its consultant, may unilaterally decide when to discharge the duty.

In this case, a significant number of historic records were disclosed to a prospective purchaser and its environmental consultant, showing that the property in question was definitely contaminated, six years earlier, at levels that would not meet current standards (but perhaps were getting better). However, simply because the plaintiff’s consultant opined that the historic records did not prove current contamination and recommended further drilling and testing (a full Phase 2 ESA), this effectively prevented a court from finding “actual knowledge” of damage, and stopped the running of the limitation period.

This raises the important question of how much knowledge equals actual “discovery” of damage under s. 5(1) of the Limitations Act, 2002? The statute states that “A claim is discovered on the earlier of, (a) the day on which the person with the claim first knew, (i) that the injury, loss or damage had occurred; and (b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known.” But surely, interpreted purposively, the statute is only requiring a level of knowledge sufficient to sustain a civil action, i.e. on balance of probabilities? Why, under this statute, must damage be confirmed 100% by current testing, as required by the Court of Appeal? It must be noted that s. 5(1) does not use the term “actual.”

Moreover, by setting the standard for discovery so high, query whether the Court of Appeal’s decision effectively makes s. 5(1)(b) meaningless? That is, even in the face of historical evidence of contamination, does the court not permit plaintiffs to arbitrarily delay the triggering the start of the limitation period, by unilaterally requesting confirmatory evidence of injury, loss or damage, and requesting that the delivery of such confirmatory evidence be delayed?

Also, given consultants – who are generally paid by the hour (like lawyers) – will invariably recommend that they should be retained to conduct more (and more current) testing, and this is often an approach favoured by the Ministry, one may ask what amount of historic evidence of contamination of a subject property will ever be enough to trigger the running of a limitation period? It must be noted that the plaintiffs in this case were willing to commence this action on April 28, 2014, based on evidence of contamination that was more than two years old. If six year old evidence is too old to prove damage, why is two year old evidence acceptable?

  1. Also raising as many questions as it answers, is the Court of Appeal’s ruling on “reasonable discoverability”. According to the Court, even where both a Phase 1 and 2 ESA have been recommended and commissioned, due to a well-known risk of historic contamination from adjacent properties, and clear and current test results are going to be obtained by the purchaser’s consultant before closing, a purchaser is entitled to defer and delay not only the completion of the Phase 2 ESA but more problematically, also the transmission of the test results from its own consultant to purchaser, and may still be found to have acted “reasonably” or with “reasonable diligence.” According to the Court, for a purchaser to do so it need only announce to its consultant that it intends to “waive” environmental conditions and, as a result, it no longer needs those test results urgently.

Query whether the Court of Appeal has assumed that the standard of urgency for “reasonable discoverability” is whether damage information is needed to close a real estate deal? By accepting, without further analysis, that a purchaser may delay (indefinitely?) receipt of damage information because it is not needed for closing, that seems to be what the Court has done.

A strong argument may be made that the Limitations Act, 2002, interpreted purposively, is not concerned with what is reasonably discoverable in order to close a real estate deal; rather, it is concerned with protecting defendants from unreasonable delay by forcing plaintiffs to commence their civil actions within two years after they are “actually” damaged, or alternatively (under s. 5(1)(b)), after they first ought to have known that they were actually damaged.  In this case, arguably, the date on which the plaintiff was actually damaged was the date of closing – April 10, 2012 – when it became the owner of a contaminated property. Although the plaintiff takes the position that it did not “actually know” that the Crombie Property was contaminated on this date, it certainly knew that there was a very significant risk it had acquired a contaminated property on this date. Shouldn’t a reasonably diligent purchaser have asked its consultant to provide all available test results as soon after the closing date as possible?

In other words, it may be argued that the date upon which a purchaser comes into ownership of a property and faces a real risk that it has just acquired a contaminated property and has suffered injury, damage or loss, should be the date on which that reasonably diligent purchaser insists upon receiving all available laboratory test results.

However, the Court does not consider the above issue.  Instead, it appears to assume that because the purchaser decided (in early March) that it did not need this information for the purposes of completing the real estate closing, it also did not need this information for the purposes of satisfying its reasonable discoverability obligations under the Limitations Act, 2002.  Had the Court broadened its consideration of “context” to one that was relevant to the purpose of the Act, it may have come to a very different result.

Put differently, this author would respectfully submit that when a court is considering the “context” of a real estate transaction for determining when damage was “reasonably discoverable” by a plaintiff/purchaser under the Limitations Act, 2002, it ought not to arbitrarily stop its analysis at the point at which a purchaser chooses to close its eyes to environmental test results in order to waive environmental conditions to complete a transaction. The court should also consider whether the decision of a plaintiff/purchaser to close its eyes to actual, available test results, is itself reasonable and reasonably diligent within the meaning of the Limitations Act, 2002, in light of when the plaintiff/purchaser knows it will be closing (will become owner) and could suffer damages, given all known risks.  Unfortunately, the Court of Appeal did not undertake this broader analysis.

Since the parties have until Monday, March 13, 2017 to serve and file an application for leave to appeal to the Supreme Court of Canada, it is too early to say whether the Court of Appeal’s ruling will be the last word on these issues.

About the Author

 

Jack Coop is a Partner with the Litigation Department of Fogler, Rubinoff LLP, and a Certified Specialist in Environmental Law.

This article is re-published with the permission of Fogler, Rubinoff LLP.

 

This publication is intended for general information purposes only and should not be relied upon as legal advice.

© FOGLER, RUBINOFF LLP. ALL RIGHTS RESERVED, 2017.

[1] Court of Appeal Decision, para. 35.

[2] Ibid., para. 41.

[3] Ibid., para. 47.

[4] Ibid., para. 43.

[5] Ibid., para. 50.

[6] Ibid., para. 51.

[7] Ibid., para. 52.

CSA Group opens new HazMat lab in Edmonton

CSA Group says the new facility will also offer testing for windows and doors

CSA Group has opened a new testing and certification laboratory in Edmonton, Alta.

The new facility specializes in testing and certification for hazardous locations, such as equipment used in oil, gas, mining, marine and fertilizer production. The expansion doubles the testing capacity of the previous lab to provide enhanced service for the increasing needs of explosive atmosphere testing and certification, not only in Alberta, but across North America.

“CSA Group is a world leader in explosive atmosphere testing, and our services for hazardous location testing and certification are growing to meet the needs of our oil and gas clients in Alberta and throughout Canada,” says Nashir Jiwani, VP of CSA Group in Canada. “We are also committed to developing leading standards and building world-class facilities to meet the needs of our clients around the world.”
. There will now be 37 different tests offered for windows and doors, including environmental factors, durability and energy efficiency.

“CSA Group’s state-of-the art windows and doors lab specializes in testing new windows and doors to North American fenestration requirements,” says Jiwani. “Manufacturers will be required to have their products tested to these standards under the updated National Building Code.”

U.S. chemical safety bill passes committee vote

If the bill passes a full Senate vote, it would mark the first substantial update to the Toxic Substances Control Act since the law was adopted in 1976.

Safety standards for thousands of unregulated chemicals could be on the way, following a bipartisan bill’s approval at the committee level Tuesday.

If the bill passes a full Senate vote, it would mark the first substantial update to the Toxic Substances Control Act since the law was adopted in 1976.

The Frank R. Lautenberg Chemical Safety for the 21st Century Act requires all new and existing chemicals be reviewed for safety, establishes new funding for EPA through user fees, and gives EPA new authority to require testing.

Since 1994 alone, more than 10,000 chemicals have come onto the market

EPA eyes Superfund removal of New Jersey landfill site

Contaminants originally found in the 10-acre site’s surface soil included sediments like fly ash and fine particles of ash from a solid fuel caused by waste gases from manufacturing

After a decade on the U.S. Superfund list, the EPA says it’s time to remove the Crown Vantage Landfill Site in Alexandria Township, N.J., once an industrial landfill that served a nearby paper mill.

Contaminants originally found in the 10-acre site’s surface soil included  sediments like fly ash and fine particles of ash from a solid fuel caused by waste gases from manufacturing.

In April 2007, EPA developed a Work Plan to address specific activities, including stabilizing the entire face of the landfill to prevent erosion; securing the site against unauthorized access; and identifying, retrieving, and removing any containers and their contents above ground to prevent direct contact with these materials. These activities were completed by September 2007.